Chapter 26.2. The Simplified Taxation System

Article 346.11. General Provisions

1. The simplified system of taxation shall be applied by organizations and by individual businessmen together with the general system of taxation (hereinafter referred to as the general taxation regime), stipulated by the legislation of the Russian Federation on taxes and fees.

Transition to the simplified system of taxation or return to the general taxation regime shall be made by organizations and by individual businessmen voluntarily, in accordance with the procedure, stipulated in this Chapter.

2. The application of the simplified system of taxation by organizations presupposes replacement of the payment of the tax on the profit of organizations, the value added tax, the sales tax, the tax on the property of organizations and the uniform social tax by the payment of a uniform tax, computed in accordance with the results of the economic activity of organizations in the tax period.

Organizations, applying the simplified system of taxation, shall pay insurance premiums for the obligatory pension insurance in conformity with the legislation of the Russian Federation.

Other taxes shall be paid by organizations, applying the simplified system of taxation, in accordance with the general regime of taxation.

3. The application of the simplified system of taxation by individual businessmen envisages replacement of the payment of the tax on the incomes of natural persons (with respect to the incomes, derived from the performance of a business activity), of the value added tax, the sales tax, the tax on the property (as concerns the property, used for the performance of business activity) and of the uniform social tax from incomes, derived from business activity, as well as of the payments and other remunerations, computed in favour of natural persons, with the payment of the uniform tax, computed in accordance with the results of the economic activity in the tax period.

The individual businessmen, applying the simplified system of taxation, shall pay insurance premiums for the obligatory pension insurance in conformity with the legislation of the Russian Federation.

Other taxes shall be paid by the individual businessmen, applying the simplified taxation system, in conformity with the general regime of taxation.

4. For the organizations and the individual businessmen, applying the simplified system of taxation, shall be retained the currently operating procedure for making cash payments and for submitting statistical reports.

5. The organizations and the individual businessmen, applying the simplified system of taxation, shall not be relieved of the discharge of their duties as tax agents, stipulated by the Code.

Article 346.12. Tax Payers

1. Recognized as tax payers shall be the organizations and the individual businessmen, who have shifted to the simplified system of taxation and who have been applying it in the order laid down in the present Chapter.

2. The organizations shall have the right to go over to the simplified system of taxation, if by the results of nine months of that year, in which the organization files an application for transition to the simplified system of taxation, the income from the realization, determined in conformity with Article 249 of the present Code, did not exceed 11 million roubles (not taking into account the value added tax and the sales tax).

3. The following have no right to apply the simplified system of taxation:

1) organizations with affiliates and (or) representations;

2) banks;

3) insurers;

4) non-government pension funds;

5) investment funds;

6) professional securities market makers;

7) pawnshops;

8) organizations and individual businessmen, engaged in the production of excisable commodities, as well as in the extraction and the realization of useful minerals, with the exception of generally spread useful minerals;

9) organizations and individual businessmen, engaged in the games business;

10) notaries, engaged in the private activity;

11) organizations and individual businessmen, who are the parties to product division agreements;

12) organizations and individual businessmen, shifted to the taxation system in the form of a uniform tax on the imputed income for the individual kinds of activity in conformity with Chapter 26.3 of the present Code;

13) organizations and individual businessmen, shifted to the taxation system for agricultural commodity producers (the uniform agricultural tax) in conformity with Chapter 26.1 of the present Code;

14) organizations, in which the share of direct participation by other organizations comprises over 25 per cent. The given restriction shall not be spread to organizations, whose authorized capital fully consists from deposits of the social organizations of invalids, if an average-listed monthly number of invalids among their workers comprises at least 50 per cent, while the former's share in the remuneration of labour fund is not less than 25 per cent;

15) organizations and individual businessmen, an average number of whose workers in the tax (reporting) period, defined in accordance with the procedure, established by the State Statistics Committee of the Russian Federation, exceeds 100 people;

16) organizations, the cost of the depreciated property in whose ownership exceeds 100 million roubles.

Article 346.13. Procedure and Conditions for the Start and the Termination of Application of the Simplified Taxation System

1. The organizations and the individual businessmen, which (who) have expressed their wish to go over to the simplified system of taxation, shall lodge an application in the period from October 1 to November 1 of the year, preceding the year, beginning with which the tax payers go over to the simplified system of taxation, to the tax body at the place of their location (at the place of their residence). In the application for transition to the simplified system of taxation the organizations shall report on the size of their incomes for nine months of the current year.

2. The newly created organizations and newly registered individual businessmen, who have expressed their wish to go over to the simplified system of taxation, shall have the right to file an application for transition to the simplified system of taxation simultaneously with lodging an application for being put onto records in the tax bodies. In this case, the organizations and the individual tax payers shall have the right to apply the simplified system of taxation in the current calendar year as from the moment of establishment of the organization, or as from the moment of the natural person being registered as an individual businessman.

3. The tax payers, applying the simplified system of taxation, have no right to go over to the general taxation regime until the end of the tax period, unless otherwise stipulated in the present Article.

4. If in accordance with the results of the tax (reporting) period the tax payer's income exceeds 15 million roubles, or if the cost of the depreciated property in the ownership of the tax payer's organization exceeds 100 million roubles, such tax payer shall be seen as having shifted to the general taxation system from the start of that quarter, in which this excess has taken place.

In this case, the sums of taxes subject to payment if the general taxation regime is applied, shall be computed and paid in the order, envisaged by the legislation of the Russian Federation on taxes and fees for the newly created organizations or the newly registered individual businessmen. The tax payers, indicated in the present paragraph, shall be relieved of the payment of monthly advance payments, stipulated by the legislation of the Russian Federation on taxes and fees, in the course of that quarter, when the tax payers went over to the general taxation regime.

5. The tax payer is obliged to inform the tax body about his transition to the general taxation regime within 15 days after an expiry of the reporting (tax) period, in which his income exceeded the limits, set in Item 4 of the present Article.

6. The tax payer, applying the simplified system of taxation, has the right to go over to the general taxation regime as from the start of a calendar year, having notified to this effect the tax body not later than on January 15 of the year, in which he supposes to shift to the general regime of taxation.

7. The tax payer, who has passed over from the simplified system of taxation to the general taxation regime, has the right to go back to the simplified system of taxation not earlier than in two years after he has lost the right to apply the simplified system of taxation.

Article 346.14. Objects of Taxation

1. Recognized as an object of taxation are:

- the incomes;

- the incomes, reduced by the amount of the outlays.

2. An object of taxation shall be selected by the tax payer himself. The object of taxation cannot be changed by the tax payer in the course of the entire term of application of the simplified system of taxation.

Article 346.15. Procedure for Defining Incomes

1. In defining the object of taxation, the organizations shall take into account the following incomes:

- the incomes from the realization of commodities (works, services), from the realization of the property and of the property rights, defined in conformity with Article 249 of the present Code;

- extra-realization incomes, defined in conformity with Article 250 of the present Code.

2. When determining the object of taxation, the individual businessmen shall take into account their incomes, derived from the business activity.

Article 346.16. Procedure for Determining the Outlays

1. When defining the object of taxation, the tax payer shall reduce the derived incomes by the following outlays:

1) the outlays on the acquisition of fixed assets (with an account for the provisions of Item 3 of the present Article);

2) the outlays on the acquisition of intangible assets;

3) the outlays on the repairs of the fixed assets (including of those rented);

4) the rent (leasing) payments for the rented (accepted into the leasing) property;

5) material outlays;

6) the outlays on the remuneration of labour;

7) the outlays on the obligatory insurance of the workers and of the property, including insurance premiums for the obligatory pension insurance and premiums for the obligatory social insurance against industrial accidents and occupational diseases, paid in conformity with the legislation of the Russian Federation;

8) the sums of the value added tax on the acquired commodities (works and services);

9) an interest paid on the monetary funds (credits and loans), given over into use, as well as the outlays involved in the remuneration for the services, rendered by credit institutions;

10) the outlays on providing for the tax payer's fire security in conformity with the legislation of the Russian Federation, those on the services involved in guarding the property and in servicing the fire-alarm signalling system, as well as those on the acquisition of fire protection and other services of the guarding activity;

11) the rent for the hired property;

12) the outlays on the maintenance of the official transport and those on the compensation for the use of personal private cars and motor cycles for official trips within the limits of the norms, fixed by the Government of the Russian Federation;

13) the outlays on business trips, in particular on:

- the worker's fares to the place of destination of the business trip and back to the place of his permanent work;

- the hire of living premises. In accordance with this Item of the outlays, subject to recompense shall also be the worker's outlays on the payment for additional services, rendered in hotels (with the exception of the outlays on the services in snack-bars and in restaurants, the outlays on the servicing in the room and of the outlays for the use of recreational and health-building objects);

- a daily or a field allowance within the limits of the norms, approved by the Government of the Russian Federation;

- the formalization and the issue of visas, vouchers, invitations and other similar documents;

- the consular and the airfield collections, the fees for the right to the entry, passage and transit of the automobile and of the other kinds of transport, for the use of sea channels and of other similar facilities, and other similar payments and fees;

14) the remuneration to a state and (or) to a private notary for the notarial formalization of documents. Such outlays shall be accepted within the limits of tariffs, approved in the established order;

15) the outlays on the auditor's services;

16) the outlays on the publication of business accounting reports, as well as on the publication and on the other kinds of revealation of other information, if the legislation of the Russian Federation imposes upon the tax payer the duty to carry out their publication (revelation);

17) the outlays on the stationery;

18) the outlays on the postal, telephone, telegraph and other similar services and the outlays on the remuneration of the communications services;

19) the outlays, involved in the acquisition of the right to the use of the software for computers and of the data bases under contracts with the possessor of the rights (under licence agreements). To these outlays shall also be referred the outlays on the renewal of the computer software and of the data bases;

20) the outlays on the advertising of the manufactured (acquired) and (or) of the realized commodities (works, services), of the trade mark and of the service mark;

21) the outlays on the preparation and on the development of new productions, workshops and aggregates.

2. The outlays, mentioned in Item 1 of the present Article, shall be accepted under the condition that they meet the criteria, indicated in Item 1 of Article 252 of the present Code.

The outlays, described in Subitems 5, 6, 7 and 9-21 of Item 1 of the present Article, shall be accepted as applied to the procedure, envisaged for the computation of the tax on the profit of organizations in Articles 254, 255, 263 and 264 of the present Code.

3. The outlays on the acquisition of fixed assets shall be accepted in the following order:

1) with respect to the fixed assets, acquired in the period of application of the simplified system of taxation at the moment of putting these assets into use;

2) with respect to the fixed assets, acquired by the tax payer before transition to the simplified system of taxation, the cost of the fixed assets shall be included into the outlays on the acquisition of the fixed assets in this order:

- as concerns the fixed assets with the term of useful life up to three years inclusive - in the course of one year of application of the simplified system of taxation;

- as concerns the fixed assets with the term of useful life from three to 15 years inclusive: in the course of the first year of application of the simplified system of taxation - 50 per cent of the cost, of the second year - 30 per cent of the cost, and of the third year - 20 per cent of the cost;

- as concerns the fixed assets with the term of useful life over 15 years - in the course of ten years of application of the simplified system of taxation, in equal shares of the cost of the fixed assets.

In the course of the tax period the outlays shall be accepted in the reporting periods in equal shares.

The cost of the fixed assets shall be accepted as equal to the residual cost of this property as at the moment of transition to the simplified system of taxation.

When defining the terms of useful life of the fixed assets, one shall be guided by the Classification of the Fixed Assets Included into the Depreciation Groups, approved by the Government of the Russian Federation in accordance with Article 258 of the present Code. For the kinds of fixed assets, not named in this Classification, the term of useful life shall be fixed by the tax payer in conformity with the technical conditions and recommendations of manufacturer organizations.

If the fixed assets, acquired after transition to the simplified system of taxation, are realized (transferred) before an expiry of three years as from the moment of their acquisition (as concerns the fixed assets with the term of useful life over 15 years - before an expiry of ten years as from the moment of their acquisition), the tax payer shall be obliged to recalculate the tax base for the entire period of the use of such fixed assets as from the moment of their acquisition till the date of their realization (transfer) with an account for the provisions of Chapter 25 of the present Code, and to pay an additional sum of the tax and of the fine.